The DCIT, Circle-1(1)(2), Ahmedabad V. M/s. Cama Hotels Ltd., Ahmedabad

ITA 430/AHD/2016

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1401 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 23-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S SHUKLA
• Keywords: Deemed dividend
• Section: 143(3); 2(22)(e); 201

Judgement Text

, A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD ( CONVENED THROUGH VIRTUAL COURT ) BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO. 430/AHD/2016 ( ASSESSMENT YEAR : 2012-13) DCIT CIRCLE-1(1)(2), A WING, ROOM NO. 308, 3 RD FLOOR, PRATYAKSH KAR BHAVAN, AMBAWADI, AHMEDABAD - 380015 / VS. M/S. CAMA HOTELS LTD. KHANPUR, AHMEDABAD 380001 ./ ./ PAN/GIR NO. : AABCC5432G ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI S. S. SHUKLA, SR.DR / RESPONDENT BY : SHRI RAJESH C. SHAH, A.R. DATE OF HEARING 03/03/2021 !'# / DATE OF PRONOUNCEMENT 06/07/2021 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF IN COME TAX (APPEALS)-1, VADODARA (CIT(A) IN SHORT), DATED 16 .12.2015 ARISING IN THE ASSESSMENT ORDER DATED 30.12.2014 PASSED BY THE ASSESSING OFFICER (AO) UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING AY 2012-13. ITA NO. 430/AHD/16 [DCIT VS. M/S. CAMA HOTELS LTD.] A.Y. 2012-13 - 2 - 2. THE GROUND OF APPEAL RAISED BY THE REVENUE READS AS UNDER: (1) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS, I N DELETING THE ADDITION IN RESPECT OF DEEMED DIVIDEND U/S 2(22)(E) OF RS.1,71,90,000/-. (2) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.6,66,077/- MADE, TOWARDS THE EXC ESS INTEREST PAID TO THE PERSONS COVERED U/S40A(2)(B) OF THE I.T. ACT . 3. GROUND NO.1 RELATES TO ADDITION UNDER S.2(22)(E) OF THE ACT. 4. THE ASSESSEE IS A LIMITED COMPANY, IN WHICH THE PUBLIC ARE NOT SUBSTANTIALLY INTERESTED. IN THE COURSE OF ASS ESSMENT PROCEEDINGS, THE AO INTER ALIA NOTICED THAT THE ASSESSEE HAS AVAILED UNSECURED LOAN FROM GROUP CONCERN, NAMELY, CAMA MOT ORS PVT. LTD. (LENDER) TO THE TUNE OF RS.1,71,90,000/-. IT WAS F OUND THAT COMMON DIRECTORS OF THE ASSESSEE COMPANY, NAMELY, SHRI JEH ANGIR R. CAMA, MRS. MEHROO J. CAMA AND SHRI RUSTOM J. CAMA HOLD MO RE THAN 10% OF THE SHARE CAPITAL. THE AO ACCORDINGLY, BY A BRI EF ORDER, INVOKED PROVISIONS OF SECTION 2(22)(E) OF THE ACT AND MADE AN ADDITION OF RS.1,71,90,000/- IN THE HANDS OF THE ASSESSEE UNDER S.2(22)(E) OF THE ACT. 5. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 6. THE CIT(A) AFTER TAKING INTO ACCOUNT THE FACTUAL POSITION AND THE SUBMISSIONS OF THE ASSESSEE IN REBUTTAL TO THE ASSESSMENT ORDER FOUND MERIT IN THE PLEA OF THE ASSESSEE FOR REVERSA L OF THE ADDITION. THE RELEVANT PART OF THE ORDER OF THE CIT(A) IS REP RODUCED HEREUNDER: 2.3. I HAVE GONE THROUGH THE FACTS AND THE SUBMISS ION OF THE APPELLANT CAREFULLY. IN THE ASSESSMENT ORDER A.O H AS OBSERVED THAT THE APPELLANT HAS RECEIVED AN AMOUNT OF RS. 1,71,90 ,000/- FROM CAMA MOTORS PVT. LTD. BEING UNSECURED LOAN. THE ASSESSES WAS REQUIRED TO ITA NO. 430/AHD/16 [DCIT VS. M/S. CAMA HOTELS LTD.] A.Y. 2012-13 - 3 - SHOW CAUSE AS TO WHY THE UNSECURED LOAN RECEIVED FR OM CAMA MOTORS PVT. LTD. SHOULD NOT BE TREATED AS DEEMED DIVIDEND U/S.2(22)(E) OFTHE I.T. ACT. THEA.O. HAS NOT ACCEPTED THE SUBMISSION O F THE ASSESSES THAT IT HAS NO INVESTMENT IN SHARES WITH CMPL FOR R EASON THAT THE COMMON DIRECTORS OF THE ASSESSES COMPANY BEING SHRI JEHANGIR R. CAMA, MRS. MEHROO J. CAMA AND SHRI RUSTOM J. CAMA H OLD MORE THAN 10% OF THE SHARE CAPITAL I.E. SHRI JEHANGIR R. CAMA IS HOLDING 21.20% AND RUSTOM J. CAMA IS HOLDING 32.60% SHARES. IN VIEW OFTHE ABOVE, THE ASSESSEE'S CASE SQUARELY FELL WITHIN THE AMBIT OF SECTION 2(2)(E) OFTHE ACT AND RS.1,71,90,000/- IS TREATED A S DEEMED DIVIDEND U/S.2(22)(E) OF THE I. T. ACT IN THE HANDS OF THE A SSESSEE BY THE A.O. THE APPELLANT HAS SUBMITTED THAT THAT APPELLANT COM PANY HAS NOT RECEIVED NEW LOAN OF RS. 1,71,90,000/- FROM CAM A MOTORS PVT. LTD. & HAS REPAID RS. 2,11,90,000/-THUS THERE IS NE T REPAYMENT OF RS.40,00,000/-.THE APPELLANT HAS SUBMITTED THAT THE SHAREHOLDERS HOLDING MORE THAN 10% SHARES IN THE LENDING COMPANY ARE NOT HOLDING MORE THAN 20% SHARE IN THE RECIPIENT APPELL ANT COMPANY WHICH MEANS THAT THEY ARE NOT HAVING SUBSTANTIAL IN TEREST IN THE RECIPIENT COMPANY. THE APPELLANT HAS ALSO CITED THA T THE HON'BLE MUMBAI TRIBUNAL IN THE DIRECT DECISION OF ACIT VS. BHAUMIK COLOUR-118 ITD 1 (MUMBAI SPL. BENCH) HELD THAT 'AS REGARDS THE APPLICABILITY OF THE PROVISION OF SEC. 2(22)(E). TH E SAME ARE NOT 'AT ALL' APPLICABLE AS THE APPELLANT DOES NOT HOLD ANY SHARE IN THE LENDING COMPANY.' THE APPELLANT HAS FURTHER SUBMITT ED THAT THE AMOUNT OF CALCULATION OF DEEMED DIVIDEND TO BE CALC ULATED AND LOOKED FROM THE POSITION ON ACCUMULATED PROFITS OF THE LENDING COMPANY AND IT SHOULD NOT BE ON THE BASIS OF ACTUAL AMOUNT OF LOAN GRANTED AND RECEIVED BY THE RECIPIENT COMPANY. THE APPELLANT HAS ALSO BROUGHT TO THE NOTICE THAT CIT(A)-6 VIDE ORDER DTD. 04/07/2014 FOR A.Y. 2010-11 HAS ALSO DELETED THE ADDITION MADE U/S. 2(22)(E) AND THE SAME SQUARELY APPLIES IN CURRENT YEAR ALSO. THA T ADDITION MADE OF DEEMED DIVIDEND U/S. 2(22)(E) BE DELETED IN FULL . 2.4. IDENTICAL ISSUE HAS ALSO COME UP IN APPELLANT' S OWN CASE FOR A.Y. 2009-10. VIDE ORDER DTD. 25-06-2012 IN APPEAL NO. CIT(A)- VI/ACIT(OSD)/R-1/184/11-12, MY PREDECESSOR HELD AS UNDER: '4.3 I HAVE CONSIDERED THE FACTS OF THE CASE; ASSES SMENT ORDER AND APPELLANT'S WRITTEN SUBMISSION. APPELLANT TOOK LOAN FROM TWO OF ITS ASSOCIATED GROUP COMPANIES WHICH AS SESSING OFFICER TREATED AS DEEMED DIVIDEND UNDER SECTION 2( 22) (E) OF IT ACT. APPELLANT SUBMITTED THAT IT WAS NOT HOLDING ANY SHARES IN THESE TWO COMPANIES AND THEREFORE THERE IS NO QU ESTION OF TAXING DEEMED DIVIDEND IN ITS HANDS IN VIEW OF THE DECISION OF SPECIAL BENCH OF IT AT IN THE CASE OF ACIT V. BHAUM IK COLOUR PVT. LTD. REPORTED IN 118 ITD 1. IT IS NOT IN DISPUTE THAT APPELLANT IS NOT A SHAREHOLDER IN EITHER OF THESE C OMPANIES WHICH ADVANCED LOANS TO THE APPELLANT AND THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF ITAT SPECIAL BENCH MUMBAI RELIED UPON BY THE APPELLANT, ADDITION OF DE EMED DIVIDEND CANNOT BE MADE IN THE HANDS OF APPELLANT. ACCORDINGLY THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS ITA NO. 430/AHD/16 [DCIT VS. M/S. CAMA HOTELS LTD.] A.Y. 2012-13 - 4 - DELETED. HOWEVER IN THE SAID DECISION OF SPECIAL BE NCH IT IS HELD THAT THE PROVISION OF SECTION 2(22) (E) CAN BE ATTRACTED IN THE HANDS OF SHAREHOLDERS. THEREFORE ASSESSING OFFI CER IS FREE TO TAKE APPROPRIATE MEASURES IN THE CASES OF SHAREH OLDERS IN RESPECT OF LOANS TAKEN BY THE APPELLANT UNDER SECTI ON 2(22) (E) OF IT ACT. ALL OTHER ARGUMENTS OF THE APPELLANT ARE NOT DISCUSSED HERE SINCE THE SAME ARE NOT RELEVANT AFTE R DELETING ADDITION IN THE HANDS OF APPELLANT IN PREVIOUS PARA .' 2.5. THE VIEW TAKEN BY THE I.T.A.T, MUMBAI SPECIAL BENCH IN THE CASE OF ACIT MUMBAI VS. BHAUMIK COLOUR (P) LTD HAS BEEN APPROVED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS . UNIVERSAL MEDICARE PRIVATE LIMITED (2010) 324 ITR 263 (BOM.) THE GUJARAT HIGH COURT IN THE CASE OF CIT V/S DAISY PACKERS (P) LTD HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE, RELYING ON THE DECISION OF THE DIVISION BENCH OF THE HIGH COURT IN CIT V. ANKITECH (P.) LTD. (2012) 340 ITR 14 (DEL) WHEREIN IT WAS HELD THAT IF THE AS SESSEE-COMPANY DOES NOT HOLD A SHARE IN OTHER COMPANY FROM WHICH I T HAD RECEIVED DEPOSIT THEN IT CANNOT BE TREATED TO BE A DEEMED DI VIDEND UNDER SECTION 2(22)(E) OF THE ACT. FROM THE READING OF TH E PROVISIONS OF SECTION 2(22)(E), IT IS SEEN THAT THE PROVISION IS INTENDED TO TAX THE DIVIDEND IN THE HANDS OF A SHAREHOLDER AND THE DEEM ING PROVISION AS IT APPLIES TO THE CASE OF LOAN OR ADVANCE BY A COMP ANY TO A CONCERN IN WHICH IS SHAREHOLDER AND HAS SUBSTANTIAL INTERES T, IS BASED ON THE PRESUMPTION THAT THE LOAN OR ADVANCE WOULD ULTIMATE LY BE MADE AVAILABLE TO THE SHAREHOLDER OF THE COMPANY GIVING LOAN OR ADVANCE. VARIOUS COURT DECISIONS E.G. ASSTT. CIT V/S. BHAUMI K COLOUR (P.) LTD.[2009] 118 ITD 1 (MUM.) (SB) & JURISDICTIONAL H IGH COURT DECISION IN THE CASE OF CIT V/S DAISY PACKERS (P.) LTD [2013] 40 TAXMANN.COM 480 (GUJARAT), SUPPORT THIS VIEW THAT T HE DEEMED DIVIDEND U/S 2(22)(E) CAN ONLY BE ASSESSED IN THE H ANDS OF THE PERSON WHO IS A SHAREHOLDER OF THE TENDER COMPANY AND NOT IN THE HANDS OF A PERSON OTHER THAN THE SHAREHOLDER. FACTS REMAINING THE SAME IN THE YEAR UNDER CONSIDERATION AND FOLLOWING THE RATIOS O F ABOVE DECISIONS AND ABOVE-MENTIONED ORDER OF MY PREDECESSOR, IMPUGN ED DISALLOWANCE OF RS. 1,71,90,000/- IS DELETED IN THE HANDS OF THE APPELLANT COMPANY. A.O. MAY TAKE APPROPRIATE ACTION IN THE CASES OF THE SHAREHOLDERS, IF REQUIRED. THIS GROUND OF APPEA L IS ALLOWED. 7. AGGRIEVED BY THE RELIEF GRANTED BY THE CIT(A) AN D REVERSAL OF ADDITIONS MADE UNDER S.2(22)(E) OF THE ACT, THE REV ENUE HAS PREFERRED APPEAL BEFORE THE TRIBUNAL. 7.1 THE LEARNED DR FOR THE REVENUE RELIED UPON THE ASSESSMENT ORDER AND COULD NOT POINT OUT ANY SPECIFIC DEFECT I N THE ORDER OF THE CIT(A). ITA NO. 430/AHD/16 [DCIT VS. M/S. CAMA HOTELS LTD.] A.Y. 2012-13 - 5 - 7.2 THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OT HER HAND, JUSTIFIED THE FIRST APPELLATE ORDER AND POINTED OUT THAT SECTION 2(22)(E) OF THE ACT HAS NO APPLICABILITY IN THE FAC TS OF THE CASE. THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE EXC EPTIONS PROVIDED IN THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT IT SELF. THE LEARNED COUNSEL FOR THE ASSESSEE BROADLY DIVIDED HIS CONTEN TIONS IN TWO PARTS; (I) THE UNSECURED LOAN RECEIVED WAS IN THE O RDINARY COURSE OF BUSINESS FOR WHICH THE INTEREST HAS BEEN CHARGED BY THE LENDER COMPANY AND SUCH TRANSACTIONS HAVE OCCURRED IN EARL IER AND SUBSEQUENT YEARS ALSO. THE ADDITIONS MADE IN AY 201 3-14 IN ASSESSEES OWN CASE WAS DELETED BY THE CIT(A), WHIC H ACTION WAS APPROVED BY THE ITAT IN ITA NO.42 & CO NO. 40/AHD/2017 ORDER DATED 10.12.2018 IN THE SIMILAR FACTS; (II) THE DETAILS OF SHAREHOL DING OF LENDER COMPANY AND THE ASSESSEE COMPANY WOULD SH OW THAT THE ASSESSEE COMPANY DOES NOT HOLD ANY SHARE IN THE LEN DER COMPANY WHICH HAVE GIVEN LOAN TO THE ASSESSEE. FURTHERMORE , NONE OF THE SHAREHOLDERS OF LENDER COMPANY HOLDING MORE THAN 10 % OF ITS SHARE CAPITAL HOLDS 20% OR MORE OF THE VOTING POWER OF TH E ASSESSEE COMPANY AND THEREFORE THE PROVISIONS OF SECTION 2(2 2)(E) OF THE ACT ARE NOT APPLICABLE AT THE THRESHOLD. IT WAS CONTEN DED THAT THE AO PROCEEDED ON GROSS MISCONCEPTION OF FACTS AND WRONG LY APPLIED THE LAW WITHOUT SHOWING FULFILLMENT OF PRIMARY CONDITIO NS OF DEEMING PROVISIONS UNDER S.2(22)(E) OF THE ACT. IT WAS THU S SUBMITTED THAT NO INTERFERENCE WITH THE ORDER OF THE CIT(A) IS CAL LED FOR. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE ORDERS OF AUTHORITIES BELOW. THE APPLI CABILITY OF S.2(22)(E) OF THE ACT IS IN CONTROVERSY. 8.1 A PERUSAL OF THE SHAREHOLDING PATTERN PLACED BE FORE US SHOWS THAT NONE OF THE SHAREHOLDERS OF THE LENDER COMPANY HOLDING 10% OR ITA NO. 430/AHD/16 [DCIT VS. M/S. CAMA HOTELS LTD.] A.Y. 2012-13 - 6 - MORE OF THE VOTING POWER HOLDS SUBSTANTIAL INTEREST IN THE ASSESSEE COMPANY. THIS BEING SO, THE BASIC CONDITION S.2(22 )(E) OF THE ACT IS NOT FULFILLED IN THE PRESENT CASE. WE, THUS, TOTAL LY FAIL TO UNDERSTAND THE APPROACH OF THE AO IN APPLYING THE LAW FOR ADDI TIONS OF THIS MAGNITUDE. SECONDLY, WE ALSO AFFIRMATIVELY TAKE NO TE OF THE PLEA RAISED ON BEHALF OF THE ASSESSEE THAT THE LENDER CO MPANY HAS GIVEN INTEREST BEARING LOAN TO ASSESSEE AND THE LOAN IS N OT INTEREST FREE. THIS BEING SO, THE SAID LOAN CANNOT BE SAID TO BE FOR THE INDIVIDUAL BENEFIT OF ANY SUCH SHAREHOLDER. IN THE SIMILAR C IRCUMSTANCES, THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF PRADIP KUMAR MALHOTRA VS. CIT (2011)338 ITR 538(CAL) HAS OBSERVED THAT ADVANCES GIVEN BY THE LENDER WAS NOT FOR THE INDIVIDUAL BENEFIT OF THE SHAREHOLDER BUT FOR BUSINESS PURPOSES AND THEREFORE SUCH TRANSA CTIONS WOULD NOT FALL WITHIN THE SWEEP OF DEEMING FICTION CREATED UN DER S.2(22)(E) OF THE ACT. THIS REASON ALSO ON A STANDALONE BASIS IS SUFFICIENT TO EXCLUDE THE APPLICABILITY OF SECTION 2(22)(E) OF TH E ACT ON THE MONEY RECEIVED BY THE ASSESSEE. 8.2 THUS, SEEN FROM ANY ANGLE, ADDITIONS ARE TOTALL Y UNJUSTIFIED MADE BY WAY OF DEEMED DIVIDEND IN THE CASE OF THE A SSESSEE AS RIGHTLY HELD BY THE CIT(A) ON THE FACTUAL BACKDROP. WE THUS SEE NO ERROR IN THE CONCLUSION DRAWN IN THE FIRST APPELLAT E ORDER ALBEIT FOR THE REASONS NOTED ABOVE. 9. ACCORDINGLY, GROUND NO.1 OF REVENUES APPEAL IS DISMISSED. 10. SECOND GROUND RELATES TO DISALLOWANCE OUT OF IN TEREST ON THE GROUND THAT EXCESSIVE INTEREST HAS BEEN PAID TO SIS TER CONCERN, NAMELY, R. J. CAMA & CO. PVT. LTD. AND CAMA MOTORS PVT. LTD. ITA NO. 430/AHD/16 [DCIT VS. M/S. CAMA HOTELS LTD.] A.Y. 2012-13 - 7 - 11. THE AO INVOKED THE PROVISIONS OF SECTION 40A(2) (B) OF THE ACT AND CONSIDERED ONLY 12% INTEREST AS REASONABLE BENCHMARK VIS- -VIS 15% PER ANNUM PAID BY THE ASSESSEE TO THESE LENDER COMPANIES. THE AO ACCORDINGLY DISALLOWED RS.5,47,9 50/- & RS.1,18,127/- AGGREGATING TO RS.6,66,077/- OUT OF I NTEREST PAYMENTS TO THESE CONCERNS UNDER S.40A(2)(B) OF THE ACT. 12. THE CIT(A) IN FIRST APPEAL REVERSED THE DISALLO WANCE SO MADE UNDER S.40A(2)(B) OF THE ACT IN TERMS OF THE FINDIN GS RECORDED BELOW: 3.3. I HAVE GONE THROUGH THE FACTS AND THE SUBMISS ION OF THE APPELLANT CAREFULLY. IN THE ASSESSMENT ORDER A.O HA S OBSERVED THAT THE APPELLANT IF ANY EXCESS PAYMENT IS MADE TO THE RELATED PARTIES, SUCH EXCESS PAYMENT IS NOT ALLOWABLE AS AN EXPENSE. THE ASSESSEE FAILED TO GIVE ANY EXPLANATION FOR GIVING EXCESSIVE RATE OF INTEREST WHEN THE ASSESSEE IS ABLE TO PROCURE THE LOAN @12% TO THE PARTIES UNRELATED TO THE ASSESSEE AS HAS BEEN DISCUSSED ABO VE. THE A.O. HAS FURTHER HELD THAT THE FACTS AND CIRCUMSTANCES IN TH IS YEAR ARE IDENTICAL TO THE IMMEDIATELY PRECEDING YEAR, TAKING A CONSISTENT VIEW; DISALLOWANCE IS MADE IN THIS YEAR ALSO. THE A .O. HAS FINALLY HELD THAT THE ASSESSEE'S PLEA THAT THE ADDITION WAS DELETED BY CIT(A), IS OF NO ASSISTANCE TO IT, AS THE APPELLATE ORDER H AS NOT BEEN ACCEPTED AND APPEAL HAS BEEN FILED AGAINST THE ORDER. ACCORD INGLY, EXCESS PAYMENT OF INTEREST OF RS. 6,66,0777- [547950+11812 7] IS DISALLOWED. THE APPELLANT HAS SUBMITTED THAT THE APPELLANT COMP ANY HAS PAID INTEREST OF RS. 27,39,747/-TO R.J. CAMA PVT. L TD. AND ALSO PAID THE INTEREST OF RS. 5,90,6337- TO CAMA MOTORS PVT. LTD. THAT THE OBJECTIVE OF SEC. 40A(2)(B) IS TO AVOID EVASION OF TAX THROUGH EXCESSIVE OR UNREASONABLE PAYMENT TO THE ASSOCIATE CONCERNS. THE APPELLANT HAS SUBMITTED THAT IT HAD FILED DETAILS B EFORE THE AO SHOWING THAT THE RATE OF INTEREST BEING PAID TO THE BANK ARE ON THE CONTRARY HIGHER THAN THE INTEREST PAID TO ASSOCIATE CONCERN. THE APPELLANT HAS FINALLY SUBMITTED THAT THAT IN THE PR EVIOUS ASSESSMENT YEAR 2010-11, CIT(A)-6 HAS DELETED THE DISALLOWANCE OF INTEREST EXACTLY ON SIMILAR GROUNDS MADE BY A.O. BY APPLYING PROVISION OF SEC. 40A(2)(B). 3.4. IDENTICAL ISSUE CAME UP IN APPELLANT'S OWN CASE FOR A.Y. 2010-11 IN APPEAL NO. CIT (A)- VI/DCIT(OSD)/R. 1/2/ 13-14 DATED 04/07/2014 AS UNDER: ITA NO. 430/AHD/16 [DCIT VS. M/S. CAMA HOTELS LTD.] A.Y. 2012-13 - 8 - 5.1 IDENTICAL ISSUE CAME UP IN APPELLANT'S OWN CASE FOR A.Y. 2009-10. VIDE ORDER DTD. 25-06-2012 IN APPEAL NO. C IT(A)- VI/ACIT(OSD)/R-1/184/11-12, MY PREDECESSOR HELD A S UNDER: 3.3 I HAVE CONSIDERED THE FACTS OF THE CASE; ASSES SMENT ORDER AND APPELLANT'S WRITTEN SUBMISSION. ASSESSING OFFIC ER DISALLOWED INTEREST IN EXCESS OF 12% PAID TO RELATE D PARTIES UNDER SECTION 40A (2B). APPELLANT SUBMITTED THAT AP PELLANT BORROWED FROM THE BANK BY PROVIDING SECURITY AT THE RATE OF 15% INTEREST CHARGEABLE ON MONTHLY BASIS. THIS INTE REST WORKS OUT ON ANNUAL BASIS AT 16.08% AND THEREFORE IT WAS ARGUED THAT APPELLANT PAID LESS INTEREST TO RELATED PARTIE S AS COMPARED TO MARKET RATE OF INTEREST FOR UNSECURED LOAN AND A CCORDINGLY THERE WAS NO ELEMENT OF EXCESS INTEREST IN THE CASE OF RELATED PARTIES. ASSESSING OFFICER DID NOT DISPUTE THE APPELLANT'S CLAIM OF BORROWINGS FROM BANK AT THE ANNUAL RATE HI GHER THAN BORROWINGS FROM RELATED PARTIES AND JUST MENTI ONED THAT RATE OF INTEREST CHARGED BY THE BANK DIFFERS FROM B ANK TO BANK. AS FAR AS APPELLANT IS CONCERNED, BANK CHARGED MOR E THAN THE INTEREST PAID TO RELATED PARTIES AND THERE FORE APPELLANT HAS NOT PAID EXCESS INTEREST AS COMPARED TO INDEPENDENT BORROWINGS. ASSESSING OFFICER JUST TOOK 12% RATE OF INTEREST AS MARKET RATE WITHOUT MENTIONING ANY B ASIS. IN THE ABSENCE OF ANY BASIS FOR ADOPTING 12% INTEREST AS M ARKET RATE, THE SAME CANNOT BE CONSIDERED AS MARKET RATE FOR THE PURPOSE OF SECTION 40A (2B). FROM THE UNDISPUTED FACTS OF THE CASE, THERE IS NO SCOPE FOR TREATING INTEREST PAYME NT TO RELATED PARTIES EXCESSIVE OR UNREASONABLE. ACCORDINGLY THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS DELET ED.' FACTS REMAINING THE SAME IN THE YEAR UNDER CONSIDER ATION AND FOLLOWING THE ABOVE-MENTIONED ORDER, IMPUGNED DISAL LOWANCE IS DELETED. THIS GROUND OF APPEAL IS ALLOWED'. AFTER GOING THROUGH THE FACTS OF THE CASE AND THE O RDERS OF MY PREDECESSORS, IT IS SEEN THAT THIS YEAR ALSO THE FA CTS ARE IDENTICAL TO THE PREVIOUS YEARS. FACTS REMAINING THE SAME IN THE YEAR UNDER CONSIDERATION AND FOLLOWING THE ABOVE MENTIONED ORD ERS, IMPUGNED DISALLOWANCE OF RS. 6,66,077/- IS DELETED. THIS GRO UND OF APPEAL IS ALLOWED. 13. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS ON THE ISSUE. IDENTICAL ISSUE HAS COME UP BEFORE THE CO-O RDINATE BENCH IN THE EARLIER YEAR RELEVANT TO AY 2011-12 IN ITA NO.1 437/AHD/2015 WHEREIN THE CO-ORDINATE BENCH HAS APPROVED THE REVE RSAL OF DISALLOWANCE MADE BY THE CIT(A) IN THESE SIMILAR FA CTS. THE AO HAS NOT DISCHARGED THE ONUS WHICH LAY UPON IT TO SH OW THAT THE INTEREST PAID IS EXCESSIVE OR UNREASONABLE HAVING R EGARD TO FAIR ITA NO. 430/AHD/16 [DCIT VS. M/S. CAMA HOTELS LTD.] A.Y. 2012-13 - 9 - MARKET VALUE OF FACILITY SO PROVIDED. WE THUS SEE N O REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). ACCORDINGL Y, GROUND NO.2 OF THE REVENUES APPEAL IS DISMISSED. 14. IN THE RESULT, THE CAPTIONED APPEAL OF THE REVE NUE IS DISMISSED. SD/- SD/- (RAJPAL YADAV) (PRADIP KUMA R KEDIA) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD: DATED 06/07/2021 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED ON 06/07/2021